Single-Payer Health Plan Would Add Trillions to the Budget, Burden Millions of Taxpayers

If you think that the so-called Affordable Care Act has been a costly disaster, Senator Bernie Sanders (I-VT) has an even bigger, costlier plan in store for health care. He is drumming up support for his “Medicare for All” proposal this week with an editorial published in Fortune and a speech at a rally in Indianapolis. It is expected that he will introduce legislation once the Senate reconvenes.

Medicare for All, the centerpiece of his presidential campaign, would institute a nationwide, single-payer health care system. In other words, the government would run a monopoly on health care delivery and financing. The price tag would be enormous, dwarfing the costs of the Affordable Care Act (ACA). In July, the Congressional Budget Office estimated that repealing most of the ACA would reduce outlays by $1.4 trillion over ten years. Medicare for All would cost nearly that much in just one year: on his campaign website, Sanders claimed the plan would cost $1.38 trillion per year and would be financed through a slew of higher taxes:

6.2 percent payroll tax on employers

2.2 percent income-based premium paid by households

Higher marginal income tax rates up to 52 percent on income over $10 million

Higher rates on estate taxes and capital gains, and a limit on deductions for individuals earning over $250,000.

In reality, the plan’s costs would be dramatically higher than Sanders’ estimates. The Urban Institute, known as a left-of-center think tank, estimated that the plan would cost $2.5 trillion in the first year and $32 trillion over a decade. In fact, one need look no further than the existing Medicare program to identify the potential for runaway cost escalation. After all, if “Medicare for some” is on track to break the federal bank absent significant reforms, it’s fair to expect that “Medicare for all” will suffer from the same fatal flaw.

In addition to undershooting costs, the plan rests on optimistic forecasts of the revenue that would be raised from its damaging tax hikes. Sanders overlooks the fact that individuals and employers would seek out ways to reduce their tax bill, leading to lower growth, wages, and ultimately, fewer tax receipts. Higher rates to compensate for the “lost” revenues would only exacerbate the fiscal gap, and attempts to broaden the price controls inherent in single-payer schemes would drive many top-quality doctors out of the system. Medicare’s Trustees have already warned about the likelihood of this happening the way the system currently stands.

Supporters claim that a single-payer system would on paper lead to efficiencies that would save money. In practice, these efficiencies haven’t materialized and prohibitive costs have led to the demise of single-payer plans in several states.

In 2011 Vermont legislators created the “Green Mountain Plan.” Three years later, the governor, a supporter of single-payer health care, was forced to pull the plug on the plan when he learned that it would nearly double the size of the state budget in just the first year.

Last November, a single-payer proposal died in Colorado when two-thirds of voters rejected a ballot measure to create a state universal health care plan. The amendment would have established a new $25 billion payroll tax, but that still would have been insufficient to finance the expensive program, leaving an $8 billion hole in the budget.

This summer, single-payer legislation was also declared dead in California, where Democrats hold supermajorities. The state Senate approved a bill, but the speaker of the Assembly shelved it after an analysis found that it would cost $400 billion – doubling the already-large state budget.

The Democratic-controlled house in New York as also approved a single-payer plan. That too would have a massive price tag that would double or even quadruple the state budget, but the Republican-controlled Senate won’t pick up the bill.

The experience of the Affordable Care Act has shown that expensive, government-run health care plans aren’t working. The long waits and deteriorating care in countries that have single-payer plans provide a stark warning of what lays ahead if one is established in the U.S. Legislators should instead focus on increasing competition, improving transparency, encouraging people to take advantage of things like Health Savings Accounts, and empowering health care consumers to choose among plans that will best serve their needs.

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